Central banks in Asia and Latin America redoubled efforts to defend their currencies this week as fears of slower global growth spurred investors to pull money out of emerging markets.

Anxiety rose after the Federal Reserve delivered a gloomy prognosis for the U.S. economy, spooking markets already on edge over a possible Greek default and euro zone bank crisis.

Investors responded by seeking safety in Treasuries and snapping up dollars, a move that pushed currencies from India, Brazil and elsewhere to multi-year lows.

South Korea stepped up its intervention to lift the won from its weakest level in a year Friday, though the currency was still headed for its biggest weekly loss since early 2009.

Central banks in Thailand and the Philippines also waded into the market this week while Indonesia went further and bought long-term bonds. India said Friday it was merely trying to calm volatile trade by buying the rupee, which hit a 28-month low against the dollar.

Earlier this year, emerging markets were fretting about excessive currency strength as investors seeking returns that were higher than what struggling developed markets could offer poured money into local currencies, stocks and bonds.

But while a strong currency can hurt exports, a sudden decline threatens to worsen inflationary pressure in these economies, which have been growing at a faster clip than developed economies in the United States, Europe and Japan.

Alexandre Tombini, Brazil's central bank chief, said officials were monitoring markets to assess the impact of a weaker real on inflation.

Brazil sold $2.75 billion of currency swaps on Thursday, an action that bolsters the real by mimicking purchases of the currency in the futures market. The real closed at a two-year low against the dollar earlier this week but was up some 2 percent on Friday.

I think central banks are reluctant to let the market dictate currency direction completely and they are very fearful that in times like these the market moves can become very one-sided as everybody rushes to the exit, said Jonathan Cavenagh, senior FX strategist at Westpac Institutional Bank in Singapore.

I don't think that they are trying to alter the current trends but prevent an unwind of positioning like what we saw during the Asian financial crisis.

Taiwan unloaded $300 million to prop up the Taiwan dollar on Friday a day after the currency posted its biggest one-day fall in 10 years.

Earlier this year, the central bank faced criticism from the island's powerful exporters over its strength.

Korea's won has lost 10.6 percent against the dollar so far this month. The Indian rupee and Indonesian rupiah have shed between 6 and 7 percent each, while Brazil's real is down more than 15 percent since September began.

DEPENDING ON RESERVES

Central banks have adopted different approaches to the problem, though. Brazil's intervention in the swaps market rather than selling dollars outright means it did not have to deplete its foreign exchange reserves. Peru's central bank placed $181 million in deposit certificates to halt the sol's decline.

Central banks can more easily weaken a currency because they have the power to print more; defending an exchange rate is limited by the amount of foreign exchange reserves on hand.

That's not a problem for many Asian central banks, which have reserve stockpiles running into the billions and, in China's case, trillions of dollars.

But sources at the Reserve Bank of India said authorities were reluctant to intervene more aggressively because its reserves are limited.

If we do intervene at all, it will be with a very narrow objective of smoothing what might be a very volatile market situation, nothing beyond that, Deputy RBI Governor Subir Gokarn told a television channel in India on Friday.

The rupee has been the worst performer among major Asian currencies of late, hitting a two-year low against the dollar this week. The central bank has pushed up interest rates aggressively in an attempt to counter inflation.

Traders estimated the local currency authorities in Korea dumped about $4 billion in dollars on Friday, helping the won gain to 1,166.0 per dollar from 1,179.8 on Thursday.

China's tightly controlled renminbi also fell against the dollar in the offshore market Friday as investors bet Beijing would slow recent currency gains as the global outlook worsens.

The spot renminbi trades in a narrow band against the dollar but China's central bank had repeatedly set its midpoint at record highs over the last month to help counter inflation.

Some investors fear that may stop if growth slows, recalling China's attempt to freeze the yuan against the dollar in the aftermath of the 2008 financial crisis.

A DIFFERENT CHALLENGE

Developed economies such as Japan and Switzerland are facing an altogether different problem. Both are value as safe havens by global investors in times of trouble, which puts unwanted upward pressure on their exchange rates.

Unlike emerging markets, the Japanese and Swiss economies are struggling, and strong currencies hurt export and tourism industries and threaten to weaken growth even more.

The Swiss central bank has responded by selling enough francs to maintain a target of 1.20 per euro, well off a record high of 1.0075 hit in August.

Japan also interviewed in August as the yen soared to a record high against the dollar, and with the yen still hovering near its all-time high, markets fear another strike.

We've been saying all along that we will take decisive action against speculative, excessive yen rises that deviate from economic fundamentals, Finance Minister Jun Azumi said Thursday in Washington, where G20 leaders gathered.

(Reporting by Jonathan Standing in Taiwan; Leika Kihara in Washington DC; Writing by Steven C. Johnson and Kavita Chandran; Editing by Chizu Nomiyama)